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Gerry O'Brien

Gerry O’Brien

Economic development does not come easy.

Just look at the efforts and evolution that the Klamath Economic Development Association is going through. It’s evolved from a small operation to a much more professionally run, quasi-public body with some financial backing from the private sector; a pay-to-play model.

KCEDA has some 34 “live” projects it is working on as far as business recruitment, business expansion and entrepreneurial start-ups. Randy Cox, executive director, told a crowd of about 70 Thursday during a quarterly report out, as a minimum, the group hopes to land nine new projects over the next three years that will mean 150 new jobs and $25 million in added revenues. And there’s more on the horizon.

A key one right now is landing a 92-room Fairfield Inn & Suites hotel at TimberMill Shores.

However, that is not without some pain, financial pain, for the City of Klamath Falls and the city school district.

KCEDA last week pitched the school district on lowering its excise tax it would receive from such a hotel’s construction by $16,000 from a predicted $32,000, thus kicking back $16,000 to help the hotel with building costs.

Further, the hotel chain based in Kansas City, Mo., is asking the city for $250,000 in aid to cover state soil testing and inspections at the former brownfield site – a recovered industrial site. City staffers are suggesting paying $160,000.

This opens up a whole new can of worms. Some we need to fish, some we need to cut bait.

The city school board is in a quandary over the $16,000 request, tabling a decision until next month. On one hand, the school district could show some good will by granting the tax reprieve. In the big picture, the money is a drop in the bucket compared to the multi-million dollar budget the school district handles. That goodwill may come back in the form of Marriott sponsoring school events, starting a scholarship for students, attracting more families to living the district.

On the flip side, the district is up against a $50 million renovation of Klamath Union High School and has sought a $4.5 million loan from the county to help cover its costs.

The excise tax on new construction was allowed by the state Legislature in 2007 to be used by school districts to make improvements to its own building. The city schools averages about $50,000 annually in excise tax funds. The hotel is expected to generate $32,000 in excise taxes.

The thing is, all of the schools in the city district are 80-plus years old. The city needs these funds to keep up appearances, sort to speak. It’s fairly cash strapped.

And, as always, if you give to one, it sets a precedent to give to all others who may want a tax break.

Not a good spot to be in. We anxiously await the school board’s decision.

Monday night, the city council takes up its request for a $160,000 donation to the hotel construction. The same problems apply; if you give to one business, shouldn’t you give to all?

It depends, however, on the type of jobs created and the permanence of the business. One could argue that a tax break is just how economic development is done. And, if done right, the tax base grows, more jobs are created and all boats float.

The site has some brownfield issues, according to the hotel’s request, which also begs the question, will all of the proposed businesses planning to locate there have the same brownfield expense on top of their normal construction costs? What are those and how high will the tab run?

We can’t answer these questions yet, but stay tuned.